For further learnings about Foreign Bank Accounts and Amnesties, the artice below is a great start to better understand what the expectations and qualifications are. There are two very specific kinds of Amnesties that are thoughroughly described. Moreover, when attempting to understand the laws that are enforced by FinCen, it is essential to understand how one can remove themselves from possible extensive penalties.
Foreign Bank Account Reports (FBARs) and Foreign Bank Account Amnesties (a.k.a. Delinquent Foreign Account Reporting’s)
While this is not a very exciting subject, it is essential to know the following information: There are two types of overseas account; the first, U.S. citizens living abroad with money in such accounts, and the second, citizens or green card folks (anyone with a Social Card) whom live in the U.S. with such accounts.
Financial Crimes Enforcement Network: Amnesty and Non-Amnesty Programs
We will be confining this discussion to those residing in the U.S. as citizens living abroad with money in offshore accounts. From time to time, the Financial Crimes Enforcement Network (FinCen) is in charge of announcing new FBAR amnesties or non-amnesty programs. Since the pardons provided in these new amnesties help to not disclose accounts held overseas, several people seek to find the programs provided by FinCen. More often than not, FinCen issues amnesties to all persons. Individuals, joint filers, trusts, corporations or other entities have successfully achieved amnesty; however, it is often a simple reduction of fines rather than a complete elimination of all non-disclosure penalties. A Partial Official Pardon (heavy penalties) is accepted by specific people that only have the next kind of alternative—which is the option of possible jail time, stiff penalties, or complete surrender of foreign accounts. This is why there is never a 100% guarantee relief for delinquent filings.
Non-Willful and Willful Failure of Compliance
While it is rare that all fines and penalties are forgiven, with the help of accountants and/or tax attorneys, many have had their fines significantly reduced, and have eliminated possible jail time. The two programs that are used by accountants and tax attorneys exist under the Federal law, and are under complete voluntary disclosure. For those entities that have unknowingly failed to file are known to be accepted by the Streamline Program. The first course allows a 6-year delinquent period to have a chance of relief that generally comes in the form of a 5% fine of the greatest balance in a foreign account. However, for those who have willfully failed to file and have not reported their income are known to fall into the other program. This program makes these individuals subject to a fine of 50% of the money in their overseas financial records.
By entering either program, the requirements are as follows: File 3 detailed amended returns with a special foreign account form, 6 years of FBARs, and fill out a voluntary disclosure form. For those who are not eligible for streamline, you will have to fill out the same forms but will not be able to avoid failure to file and failure to pay IRS (code section 6662 and 6663) on the amended returns. Later on, these same entities will typically also pay some FBAR penalties on delinquencies assessed by the IRS.
Offshore Voluntary Compliance Initiative (OICI) to Foreign Bank Account Amnesties
A past similar program was the Offshore Voluntary Compliance Initiative (OVCI). The initiative was meant to encourage entities that were not in compliance with their individual reporting’s to come forward and disclose unreported activities. In particular, the IRS was primarily concerned with offshore income. Individuals and entities that qualify for the program are told that they will not face criminal prosecution. The IRS tries to entice them to volunteer the disclosure of their foreign financial activity. However, by promising lighter penalties and convincing them to come forward, the individuals and entities are admitting that they have not been complying with requirements. Essentially admitting guilt! These entities are throwing themselves to the mercy of IRS with the hope that they will not face criminal prosecution or 100% penalties.
